My husband, Shane, is most likely going to pursue a Master’s degree to help with his future career advancement. His employer offers $4,000 per year in tuition reimbursement, but we will be on the hook for fees, books, and whatever other miscellany that comes with it. Unfortunately, $4k/year in tuition reimbursement won’t cover a lot of credit hours.

(Note: I wasn’t sure if we’d have to claim that $4k in tuition reimbursement as income. Turns out, reimbursement under $5,250 is not taxable, but of course double-check me on that).

I’m researching the fees we’ll need to pay so we can have a savings target in mind. I’m also looking into tax breaks and how those can help us maximize our money.

For instance, the Indiana 529 plan has a pretty nice perk for in-state residents. I can get a 20% tax credit on the amount we put in a 529 plan, up to $1,000 per year. So let’s say somehow I manage to put $5,000 in a 529 plan in a calendar year. That’s a $1,000 reduction on my state income tax bill. Big money!

And you know what happens if you take that $1,000 tax refund and put it back into the 529? The next year, on that money alone, you’d get $200 off of your Indiana taxes. Keep on rolling it, and the next year you’d get $40. The next, $8. The next, $1.60 (yay). Following me here?

My point is, that initial $5,000 savings contribution could turn to $6,249 thanks to the state income tax benefit. That’s not even counting potential investment revenue, which would grow tax-free.

We wouldn’t want the money in anything risky since we’d need the funds soon, but even if it was drawing a small amount in a money market account, that’s still a few extra dollars.

To me, putting $5k in that fund in a calendar year is a big undertaking. But still, even if we put away “just” $1,000 (or $83 per month), that $1,000 can turn to $1,249 if we roll the income tax refund from that tax credit back into the plan.

Think of it this way. If I invest $5,000 and get back $6,249 for my effort, that is a whopping 25% return on my investment over roughly 4-5 years. If I invest $1,000 and get $1,240 three years later, that’s still a 24% return on investment.

It’s near impossible for me to make a big, risk-free return like that in the stock market. And again, since it’s in the 529 plan, the growth would be tax sheltered. Yay!

I’m reading up on tax code to determine which federal income tax credits or deductions we could claim. It’s looking like the Lifetime Learning Credit might be our own family’s best option, to deduct up to a $2k credit per year on our federal taxes. That could boost our “free” money to $6k per year in tuition and fees and books, since the LLC credit could cover books and fees. There might be other options out there, though.

Did I mention my husband wants to earn his Master’s in Accounting so that he can then sit for the CPA exam? Yeah. Wish I had a CPA’s brain full of knowledge right about now. That would make this tax stuff a lot simpler. I still like learning about it on my own though. Lowering your tax bill (legitimately! always legitimately!) is a solid way to boost your finances.

Have you gone back to school? What did you do to make the most of your dollars?